Ripple to launch U.S. dollar stablecoin, taking on a $150 billion market dominated by Tether, Circle

Crypto
startup
Ripple
is
the
latest
major
player
to
jump
into
the
$150
billion
stablecoin
market
with
the
launch
of
a
digital
currency
pegged
to
the
U.S.
dollar.

The
stablecoin
will
always
be
backed
1-to-1
by
an
equivalent
sum
of
assets
—
U.S.
dollar
deposits,
U.S.
government
bonds
and
cash
equivalents
—
that
the
company
holds
in
reserve,
according
to
Ripple.

The
crypto
firm
said
its
reserves
would
be
accounted
for
in
publicly
available
monthly
attestation
reports.
It
did
not
say
which
firm
will
audit.

Ripple
is
first
launching
its
stablecoin
in
the
U.S.,
but
didn’t
rule
out
offering
additional
regional
products
in
non-U.S.
markets,
like
Europe
and
Asia.

The
move
would
pit
Ripple
against
stablecoin
giants
like
Tether,
which
is
behind
the
largest
stablecoin
USDT,
and
USDC
issuer
Circle.

Payments
giant


PayPal,
meanwhile,
launched
its
own
U.S.
dollar
stablecoin
called
PayPal
USD,
a
stablecoin
backed
by
U.S.
dollars
and
dollar
equivalents
that
is
issued
by
crypto
firm
Paxos.

But
Ripple
CEO
Brad
Garlinghouse
said
he’s
not
deterred
by
the
competition. “This
market
will
look
different
[in
future],
certainly
based
on
size,”
he
told
CNBC
in
an
interview
this
week.

Garlinghouse
said
the
company
decided
to
introduce
a
stablecoin
to
the
market
last
year
in
response
to
the “depegging”
of
rival
firms
Tether’s
USDT
token
and
Circle’s
USDC.

USDT
temporarily
lost
its
$1
peg
in
2022
amid
market
instability
resulting
from
the
collapse
of
terraUSD,
a
popular
so-called
algorithmic
stablecoin.

USDC
also
temporarily
slipped
below
$1
in
2023
after
revealing
exposure
to
the
collapsed
tech-focused
lender
Silicon
Valley
Bank.

Some
critics
dispute
the
source
of
Tether’s
reserves,
and
have
doubts
about
whether
company
is
sufficiently
capitalized
to
survive
a “bank
run.”

For
its
part,
Tether
says
its
token
is
fully
backed
by
quality
reserves
and
has
always
been
able
to
meet
withdrawals,
even
in
times
of
distress.

Garlinghouse
said
there’s “some
uncertainty”
about
the
current
market
leader
among
U.S.
regulators,
without
disclosing
a
name.
He
argued
that
Ripple
is
a
regulated
institution
with
licenses
in
New
York,
Ireland
and
Singapore,
among
other
countries.

Tether
is
the
world’s
largest
stablecoin
issuer,
with
a
market
capitalization
of
$106.3
billion,
according
to
CoinGecko
data.

Asked
about
Ripple’s
move
to
launch
a
stablecoin
and
Garlinghouse’s
comments,
a
Tether
spokesperson
told
CNBC: “We
wish
Ripple’s
team
would
have
more
success
with
their
new
stablecoin
than
they
had
so
far.”

Tether
is
registered
with
FinCEN,
the
U.S.
financial
crimes
watchdog,
which
is
not
the
same
as
being
regulated.
The
business
is
required
to
submit
suspicious
transaction
reports
and
reports
for
deals
totalling
more
than
$10,000.

A
Ripple
stablecoin
would
also
serve
a
purpose
the
crypto
giant
touts
as
part
of
its
On-Demand
Liquidity
product,
which
aims
to
settle
transactions
rapidly
between
banks
and
other
financial
firms
using
the
XRP
token
as
a “bridge”
currency.

Ripple
has
faced
obstacles
in
finding
a
use
case
for
Ripple
with
banks
and
payment
firms.

Santander
initially
wanted
to
use
XRP
for
cross-border
payments,
but
chose
not
to
after
finding
Ripple
wasn’t
active
in
enough
markets
yet
to
support
its
needs.

MoneyGram
ended
a
partnership
to
use
XRP
for
cross-border
transfers
after
citing
increased
costs
associated
with
the
need
for
partnerships
with
exchanges
and
other
necessary
counterparties
in
local
markets.

Garlinghouse
insisted
that
Ripple
hasn’t
given
up
on
XRP
as
a
payment
token
and
that
stablecoins
would
serve
as
more
of
a
complementary
product
for
the
XRP
ecosystem.

“We’ve
been
using
stablecoins
in
our
payment
flows
for
years,”
he
said. “This
is
not
a
new
thing
for
us.”

He
added
that
other
so-called
Layer
1
protocols
—
blockchain
networks
with
their
own
tokens
—
have
launched
stablecoins
and
logged
growth
in
overall
volume
and
liquidity.

“Our
view
is,
having
pools
of
liquidity
that
are
native
to
the
XRP
ledger,
they
complement
and
help
grow
the
XRP
ecosystem,”
Garlinghouse
told
CNBC. “In
fact,
the
number
one
request
we
get
from
the
XRP
community
is
to
launch
a
USD-backed
stablecoin
on
the
XRP
Ledger.”

XRP
is
up
around
13%
in
the
last
12
months,
according
to
CoinGecko
data,
and
is
currently
trading
at
about
57
cents.

The
U.S.
Securities
and
Exchange
Commission
in
2020
hit
Ripple
with
a
lawsuit,
claiming
the
company
illegally
sold
XRP
to
investors
when
it
should
have
registered
the
transactions
with
the
regulator.

A
court
judge
recently
ruled
XRP
is
not
in
and
of
itself
a
security,
but
said
that
sales
to
institutions
should
be
counted
as
unlawful
securities
sales.

The
blockchain
company
sold
$728.9
million
worth
of
its
XRP
token
to
hedge
funds
and
other
sophisticated
buyers,
according
to
the
U.S.
District
Court
for
the
Southern
District
of
New
York.

The
SEC
is
seeking
$2
billion
from
Ripple
as
part
of
its
lawsuit.

Garlinghouse
said
that
what
the
SEC
is
asking
for
is
unreasonable,
as
it
only
pertains
to
the
$728.9
million
of
XRP
the
company
sold
to
institutions.

He
expects
the
total
settlement
to
be
a
fraction
of
that
in
the “millions,”
rather
than
in
the
billions,
of
dollars.

The
SEC
was
not
immediately
available
for
comment.